Public blockchains are powering novel forms of coordination across money, finance, and the internet. By decentralizing institutions with open-source software, blockchain technology minimizes the need to trust centralized authorities.The Bitcoin protocol has enabled two other revolutions: DeCentralized Finance (DeFi) and Internet (Web3) Revolutions.
Public blockchains shift the distribution of trust, replacing institutions that rely on centralized authorities with decentralized, open- source software. The first profound application was self-sovereign, digital money (bitcoin). While centralized institutions must coordinate the functions of a financial system, Bitcoin operates as a single, decentralized institution. Instead of relying on accountants, regulators, and governments, Bitcoin relies on a global network of peers to enforce rules.
Public blockchain infrastructure serves as the backbone for new forms of economic coordination: it minimizes the need to trust centralized institutions. The decentralized, open, and permissionless characteristics of public blockchains lower the cost of coordination, among other advantages.
Investors once thought the internet was a new channel like Radio, TV and the Newspaper. Now, the internet is facilitating all the previously existing "channels". Similarly, cryptoassets issued on public blockchains are likely to impact all asset classes. Just as the internet turned information into packets online, public blockchains are likely to turn all assets (currencies, equities, commodities, art, etc,) into transactions on-chain.:
The Bitcoin protocol created the most profound application of public blockchain infrastructure. In addition to Global, Decentralized, Non-State Money, public blockchains also have catalyzed Decentralized Finance (DeFi) and Interoperable, User- Owned Web (Web3) Revolutions.
The Money Revolution requires predictable monetary assurances, maximum decentralization, and conservatism. The Financial and Internet Revolutions require some tradeoffs to achieve scalability, convenience, and innovation. Competing blockchains should recognize that too much trust in centralized authorities risks a reversion to the status quo.
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Information presented should not be considered investment advice or a recommendation regarding any particular security. Sources: US Bureau of Labor Statistics, Federal Reserve Economic Data, US-OECD, US Department of Labor, World Bank, Gartner, IDC, Kagan Research, McKinsey Global Institute and ARK Investment Management. Copyright © 2022 TOLIMA LP - All Rights Reserved.